The Cost of Managed IT Services: A Comprehensive Breakdown

Posted by Stephanie Hurd on Nov 5, 2019, 8:15:00 AM
Stephanie Hurd
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You have a gut feeling that something isn’t right about the way you’ve been approaching IT in your business. You’re not sure exactly what to do, but you’re afraid of what might happen if you continue the current path. 

Maybe you have one or two internal IT employees. You’re worried about what would happen if your network crashes overnight or while they’re on vacation. Maybe you contract with a freelancer or company to come to your business and install or troubleshoot equipment as needed. They do the work you ask, but you’re not sure if there are better hardware and software options available. 

If these are the things keeping you up at night, outsourcing your IT department might be the right solution for you. Managed IT is just one of the four main ways businesses approach IT support, but it is the only comprehensive outsourced IT option that will address your concerns. 

With managed IT services, an IT company takes on complete oversight of your network and support of your devices and end users. Managed IT services include both strategic and tactical services. You get the benefits of an IT strategy with a team of professionals handling the monitoring and maintenance of your network along with the day-to-day end user support.  

How much do managed IT services cost?

The typical monthly cost of managed IT services is:
  • $99 to $250 per user; OR
  • $25 to $100 per workstation; AND
  • $75 to $400 per server
Managed IT Service providers may also:
  • Require a one-year contract. 
  • Charge an onboarding fee of about cost of one month of service. 
  • Expect a $500 to $1,000 per month minimum contract. 

Types of Managed IT Services

There are a few different types of managed IT service offerings, all with different price points. Some companies offer partially managed IT services, in which the provider takes on only a portion of the functions of a typical managed service provider. This option comes at a lower price point, but you’re left with the cost and responsibility of maintaining some IT responsibilities in-house. Alternatively, many managed service providers offer a vast menu of add-on services customizable to your specific needs. 

Here is an idea of what you can expect to spend from the bare minimum level of managed IT services, to a full-service managed IT services package. 

Network Monitoring 

Network monitoring is the most basic type of managed IT service. Network monitoring solutions continuously assess the health and functionality of all network components. They proactively alert technicians to issues. Most issues are then mitigated before they impact functionality.  It only provides a fraction of the services provided under fully-managed IT services. The initial cost is less expensive than fully managed IT but doesn’t offer complete peace of mind. Because you’re only paying for monitoring, a significant amount of responsibility for your IT systems is still on your shoulders. 

Depending on the pricing model of your provider, monthly fees for network monitoring are usually around $5 to $25 per device or $75 to $150 for a small business network. 

These monthly fees do not include issue resolution. Your managed service provider gives you monitoring alerts to be addressed by your internal resources (read added internal costs and responsibility). If you want your provider to address issues identified through their monitoring service, they will charge an hourly rate, usually $100 to $300 per hour. As you can imagine, this presents a lot of opportunity for unanticipated and uncontrollable costs. 

Network Monitoring Plus Support

Network monitoring alone is an option, but it’s not something most reputable providers offer as a stand-alone service to just any business. It is usually reserved for larger businesses with internal IT resources capable of responding to network issues without further assistance from the managed service provider. 

If you need to rely on your IT company to remediate issues, it’s in everyone’s best interest to include technical support with network monitoring. 

Imagine you will get a bill for at least $90 every time your IT company addresses an issue. That bill goes up to $270 if they spend just an hour and a half on the resolution. Would you be more likely to question the necessity of the resolution? Would you be more likely to allow small issues to nag over time until they become large enough to warrant the repair cost? Of course you would.

Those nagging problems you choose not to address create more work for your IT company. They continue to receive network alerts and must continually ignore them. They spend time to determine if new problems are new or just a symptom of another issue, rather than just efficiently addressing everything as it comes. On top of that, you’re stuck dealing with the symptoms of the issue, like sluggish computers, low drive space, incomplete backup data, or security vulnerabilities.

It’s better for both you AND your IT company if they have the freedom to address issues as they arise. So, most managed service providers only sell monitoring alone as part of co-managed services, in which they partner with an internal IT team to co-manage the network. For the average business with little to no internal IT resources, managed service providers pair flat-rate technical support with network monitoring as the minimum level of fully managed IT services available. 

You will pay more per month for technical support, but you’ll save in the uncontrollable costs associated with issue resolution and day-to-day support. 

Managed service providers fall under two different billing models: per device or per user. From the customer perspective, there’s not much difference between the two models. It’s only a factor if your business has a significant number of users sharing workstations, or you have significantly more devices than users for some reason. Those instances are rare in today’s modern workplace. The difference comes down to the internal business administration processes of the provider and if they built billing processes to more closely track users or devices on any given contract. 

Cost Per User

The monthly fee for network monitoring and technical support in a per user billing model is typically around $99 to $250 per user.

Cost Per Device

The monthly fee for network monitoring and technical support in a per device model is typically around $25 to $100 per workstation and $75 to $400 per server. Some providers also charge for other managed devices like firewalls, routers, and access points. Providers who charge less per server and workstation may also charge for every firewall. Providers who charge more per workstation and server are more likely to include management of other network components in that fee.

Additional Costs

A new managed service provider takes over management of your existing technology, in whatever state it is in. It takes time to analyze and document all corners of your network. This is why some managed service providers charge an initial onboarding fee, usually around the cost of one month of service.

Additionally, many managed service providers maintain a minimum monthly contract amount, often around $500 to $1,000 per month in managed IT services. 

Additional Benefits

Since you pay the same price no matter how much support your IT company delivers it’s in their best interest to fix problems quickly and fix them correctly the first time. It also means they’ll expect you to keep equipment and software current and up to date. Under the managed IT services model, your IT company will get to know your network and business over time. As they better understand you, your business, and your technology they’ll make strategic recommendations to improve the functionality of technology in your business. 

Some managed service providers take this a step further and add a dedicated virtual Chief Information Officer (vCIO) to your service package. Your vCIO offers strategic direction, much like an internal CIO would do for your company. This strategic component of managed IT services is arguably the greatest value of the services. The average salary of a CIO in Hagerstown, MD is between $100,000 and $170,000, with CIOs in the greater Washington, D.C. earning upwards of $300,000 per year. Managed IT services offer CIO-level strategic direction with tactical implementation for a fraction of the cost of just one upper-level IT professional for most businesses. 

Related Article: Compare the cost of different types of business IT support.

Managed IT Add-On Services

A typical managed IT services contract offers strategic advice, network monitoring and management, and access to as much device and end-user support as necessary. It’s likely your managed services provider will make some strategic recommendations to invest in additional services necessary to secure and protect your data and operate your office more efficiently. 

Some of the most common managed IT add-on services include:

The cost of add-on services varies greatly. In general, the more services you can wrap under one vendor, the more cost-effective you can be with your investment.

For example, it’s not unusual to work with one company for IT support and another for copier service. Your copier company coordinates with your IT company for necessary troubleshooting up to the network jack. This leaves you paying two companies to collaborate on service. Your IT company knows your network and your specific compliance and security requirements. For that reason alone, it’s a good idea to include them in supporting every device attached to your network so they can advise you on any security risks. 

Final Thoughts

Managed IT services are not created (or priced) equally. It can be incredibly difficult to compare quotes from different companies with so many different types of services potentially included and pricing models offered.

Know that all managed IT services basically offer three things:

  1. IT Strategy
  2. Network Management and Monitoring
  3. Tech Support and Troubleshooting

To truly compare pricing, get an understanding of the level of service each provider offers in those three areas, plus additional services. Choose the provider with a service level that will help you sleep better at night knowing someone is looking after your IT systems at a fair price for the level and quality of service expected.

Topics: Technology Strategy, Business Strategy, Purchasing, Outsourced IT Support

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